The US Food and Drug Administration (FDA) recently issued a warning regarding GlaxoSmithKline’s (GSK) epilepsy drug, Lamictal. The FDA stated that Lamictal could cause a type of meningitis – aseptic meningitis.
The FDA became aware of the link between Lamictal and aseptic meningitis while conducting routine checks of serious adverse events associated with the use of the drug. According to the agency, over a period of 15 years (December 1994 – November 2009) about 40 cases of aseptic meningitis were detected in patients using Lamictal.
The FDA observed that 35 of these patients had to be hospitalized. While the symptoms of aseptic meningitis disappeared once the patients stopped taking the drug, the symptoms reappeared, in a more severe form, in 15 patients who started taking the drug again.
Based on these findings, the FDA has decided to update Lamictal’s label so as to include a warning regarding the link between aseptic meningitis and Lamictal. The agency is in discussions with GlaxoSmithKline regarding the new label.
We do not expect the FDA’s warning to have a major impact on Lamictal sales. Lamictal, which is approved for the treatment of bipolar disorder in addition to epilepsy, is currently facing generic competition and is not a major contributor to Glaxo’s top line. The product posted sales of $185 million in the recently reported second quarter of 2010.
Meanwhile, GlaxoSmithKline is currently seeking approval for Ezogabine, which has been developed for the treatment of epilepsy. GlaxoSmithKline has a collaboration agreement with Valeant Pharmaceuticals International (VRX) for Ezogabine. Ezogabine, which recently received a favorable recommendation from an advisory panel of the FDA, is presently under FDA review and a response should be out by August 30, 2010.
Neutral on Glaxo
We currently have a Neutral recommendation on GlaxoSmithKline, which is supported by a Zacks #3 Rank (Hold). The consumer side of the business is performing well and should help drive top-line growth. Moreover, GlaxoSmithKline’s diversified base and presence in different geographical areas should help support revenue growth.
GlaxoSmithKline’s restructuring initiative should help offset the impact of increasing generic competition in the next few years and help earnings grow faster than revenues. While we remain concerned about the looming generic competition, we are pleased with GlaxoSmithKline’s progress with its late-stage pipeline.
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